littlekracker

WASHINGTON (MNI) - Treasury Secretary Tim Geithner will spend most of next Thursday on Capitol Hill, defending his department's international economic and foreign exchange report, and trying to persuade lawmakers that he is making progress in getting China to reform its currency.

Geithner will testify Thursday on the Treasury report before the Senate Banking Committee at 10 a.m. and then again at 2 p.m. before the House Ways and Means Committee on the same report.

Ironically, the Treasury secretary will be explaining the report which was due on April 15 but released months late, just weeks before a new report is due in October.

Geithner is likely to spend next Thursday on the defensive, explaining Treasury's Forex report to skeptical lawmakers.

Geithner released his department's semiannual currency and foreign exchange on July 8 and it concluded that no major trading partner, including China, manipulated its currency.

But Geithner vowed to be vigilant in monitoring Chinese currency reforms which were announced on June 19. "What matters is how far and how fast the renminbi appreciates," Geithner said.

"We will closely and regularly monitor the appreciation of the renminibi and will continue to work towards expanded U.S. export opportunities in China that support employment in the United States, in close consultation with Congress," he added.

The congressional reaction to the Treasury report when it was released ranged from politely skeptical to derisive. After the report was released, Senate Banking Committee Chairman Chris Dodd said the Treasury report told an obvious truth.

"China continues to undervalue its currency," Dodd said, adding that his committee would hold a hearing with Geithner to "determine what solutions we can deliver for American workers so they can secure jobs and compete."

Sen. Chuck Schumer, a member of both the Senate Banking and Finance Committees and a champion of sanctions legislation, called the Treasury report "as disappointing as it is unsurprising."

Acting House Ways and Means Committee Chairman Sander Levin said the report confirmed his view that China is using its currency as a tool to promote its exports.

"There is no real question that China's exchange-rate policy is unfair," he said, adding that the U.S. should consider taking the matter to the WTO and arguing its currency is an unfair trade subsidy.

Sen. Chuck Grassley and Sen. Orrin Hatch, the top two Republicans on the Senate Finance Committee, issued sharp criticisms regarding Treasury's decision not to call China a currency manipulator.

"Everyone knows China manipulates its currency," Grassley said in a statement. He warned the administration that if it "fails to address it (China's currency) in a meaningful way, Congress will have to act."

Hatch also blasted Treasury's report. "I'd say this report is laughable if the consequences weren't so dire," Hatch said. He said Treasury's failure to call China a currency manipulator was "weak-kneed."

The Treasury secretary is almost certain to tell lawmakers that he shares their frustration with China, but will urge them to hold off on any legislation this fall.

While some lawmakers want to press ahead now with currency legislation, they face a daunting, nearly impossible, congressional schedule.

The House and Senate are scheduled to be in session from Sept 14 to Oct. 8 before breaking before the mid-term elections.

Analysts have said that Congress is likely to pass stop-gap legislation that keeps the government fully funded this fall, but very little else. House Majority Leader Steny Hoyer said in July that the House could vote on a currency bill this fall.

Schumer, a leading Senate proponent of China currency legislation, has repeatedly vowed to make a "serious push" on a currency bill this year.

He is co-sponsoring a bill with Sen. Lindsey Graham and four other senators. It would compel Treasury to report to Congress biannually on what nations have "fundamentally misaligned currencies" with the U.S. If those countries, after having been identified by Treasury, do not address this issue within 90 days, the administration would be required to take action at the International Monetary Fund and end federal procurement regarding these nations.

After 360 days, the U.S. Trade Representative would be required to request dispute settlement proceedings at the World Trade Organization.

If the Commerce Department ruled that this currency imbalance amounted to an impermissible subsidy, it could open the door to the imposition of countervailing duties on Chinese imports on a product-specific basis. It could also lead to anti-dumping remedies being applied to products from China.

Experts often argue that using countervailing duty and anti-dumping measures to punish China for its exchange rate policies would be ruled illegal by the WTO.

Even this legislation, if enacted, would be far less draconian than the bill Schumer drafted in 2005 that would have imposed a 27.5% retaliatory tariff on Chinese imports if China failed to significantly revalue its currency.